Google just presented splendid results for Q2 2012. Only rarely does a company of that size and profitability show such growth rates. For us as online marketing professionals, obviously, Google is not just any company but to an extent a company that determines our jobs. Certain speculation erupted online about how the recent algorithmic updates helped increase revenue by promoting ads and rendering organic results less relevant. I would like to address these concerns in this post and provide supporting evidence.
The quarterly numbers (Q2 2012)
- Over $12b revenues
- Of which Google’s websites contributed $7.5b
- 21% growth rate on Google properties revenues
Google’s annual and quarterly reports reveal not only numbers but also help analyze its long-term strategy and trends. This quarterly report ads small pieces to the puzzle: Advertising in search is just not sexy enough anymore because revenue growth rates are declining and are expected to decline over time. The next hot areas are social, enterprise, commerce, and local (see p.2 of earnings slides)
The ads on google.com
Google states in the quarterly report, that the success of its advertising business depends among other things on:
- The relevance, objectivity, and quality of our search results and the relevance and quality of ads displayed with each search results page.
- The number and prominence of ads displayed on our websites
But did advertising really increase overall?
Rankpanel’s keyword coverage is very well suited to answer this question in one click: When comparing the number of keywords with ads for 3rd week of July 2011 with the same week in 2012 it is quite clear that ads shown decreased significantly! (I also checked other weeks in the same quarter and found comparable results.)
What we see, though, is a significant change in ad distribution on the SERP. Google moved clearly away from showing only ads on the right side and towards showing ads above the organic results. The change is dramatic: In 2012 Google shows 13 times more SERPs with exclusively top ads, while SERPs with both only ads to the right and both right and top ads decreased. At the same time SERPs showing no ads at all doubled!
This shift can explain the 42% increase in paid clicks, as top ads have a significantly higher CTR.
It does also point towards the conclusion that not lower quality search results but different ad placement drove Google’s revenue.
Other factors driving revenue
Having said that, the Rankpanel keyword set is composed of 500k keywords. Therefore, these results do not reflect on the long tail.
Another known factor is not represented in the numbers: Google has increased the number of ways to monetize the SERP via, e.g.
- Paid product listings
- Vertical affiliates, such as flights
- Monetization via Youtube videos
The numbers and trends suggest that Google is overall leaving less money in the SERP. Tweet this
Better monetization is achieved via
- AdWords position shifting
- New ways of monetization
- I don’t think that Google would cut in their own flesh by diminishing the quality of search results on purpose, given the increased amount of SERPs with no ads whatsoever. Tweet this
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